Extended Stay America has secured a $1.9 billion loan commitment to refinance 220 properties across 33 states, marking a significant bet by lenders on the extended-stay hotel sector even as performance metrics decline industrywide.
JPMorgan Chase leads a consortium of six lenders that are expected to originate the commercial mortgage-backed securities loan this month. The portfolio comprises 24,560 rooms controlled by private equity giants Blackstone and Starwood Capital Group through their joint ownership of Extended Stay America.
The floating-rate loan is expected to carry a two-year initial term with three 1-year extension options, according to Fitch Ratings and KBRA's analysis of the upcoming offering. The loan requires monthly interest-only payments based on the Secured Overnight Financing Rate plus an estimated 2.5%. The loan proceeds would refinance $1.8 billion in existing debt from a 2021 CMBS transaction. The original $4.6 billion securitization included 560 properties.
Since acquiring Extended Stay in 2021, Blackstone and Starwood have disposed of or repurposed underperforming hotels. These included properties in locations where Extended Stay lacked sufficient density for operational efficiency, as well as properties with attractive alternative uses, according to the bond rating firms' analysis.
The current balance of the 2021 loan stands at $3.9 billion. Lenders recently extended the maturity date to July 2026.
Industry challenges
The financing comes at a challenging time, as the extended-stay hotel sector faces headwinds from aggressive supply growth. Revenue per available room fell 2% in August, marking the fifth consecutive monthly decline, CoStar data shows.
Room supply jumped 5.2% year over year in August, while demand rose 4.3%. New rooms outpacing demand growth puts pressure on rates and occupancy, according to CoStar analysis.
Average daily rates slipped to $124 in August, down 1.2% from the prior year, CoStar data shows. Occupancy stood at 76%, down from June's 78% peak.
Blackstone did not respond to CoStar News' request for comment on the pending refinance.
Blackstone and Starwood have invested heavily since acquiring Extended Stay America for $6 billion in June 2021. The firms spent $251.8 million on strategic initiatives and renovations across the portfolio since then, or $10,251 per room, according to Fitch.
The portfolio to be refinanced posted 77.2% occupancy from July 2024 to July 2025, with an average daily rate of $77.91, according to KBRA. Revenue per available room reached $60.13.
This marks Blackstone's third major Extended Stay America-related transaction. The firm first acquired the company for $3.1 billion in 2004, sold it to Lightstone Group for $8 billion in 2007, then bought it back through a bankruptcy auction in 2010 for $3.9 billion as part of an investment consortium.
Extended Stay went public in 2013 before Blackstone and Starwood completed their 2021 acquisition.